Valuing Adaptation: Real Estate Market Responses to Climate Change Adaptation Measures

Abstract

This research examines the economic impact of climate change adaptation measures on the housing markets of two representative coastal cities in the United States located along the Atlantic Ocean. The results shed light on how adaptation measures and investments influence housing values and local economies with respect to their place-based and local forms of implementation. Numerous quantitative approaches, including multiple sets of geospatial modeling and panel-data hedonic regression analyses, are used to examine changes in property values associated with climate adaptation measures and the dynamics of risk perception. The results also signal how risk perception and hurricane characteristics are reflected in housing markets, thereby shedding light on the effects of anticipatory and reactive adaptation strategies in the reclassified categories of hard infrastructure, green infrastructure, adaptive capacity, and private adaptation on property values in these coastal communities. Collectively, the study suggests which adaptation strategies, characteristics, and attributes can contribute to maximizing both community resilience and economic benefits against the weather extremes caused by climate change. This study highlights that natural green infrastructure as a climate adaptation measure is associated with a housing price appreciation of 9.6% in Miami-Dade County and 2.7% in New York City. Structural elevation achieved by raising foundations provides 6.6% and 13.8% in housing price increases in Miami-Dade County and New York City, respectively. Adaptation measures for storm surges provide the largest positive impact on housing prices at 15.4% in Miami-Dade County. The study further suggests that implementation of climate adaptation should be based on local-specific information, rather than relying upon national or state-level data, due to local idiosyncrasies, location-specific storm characteristics, and the subjective nature of risk perception. Together, this study helps to provide a clearer understanding of how different types of climate adaptation measures interacting with storm characteristics and risk perception are contributing to reinforcing a coastal community resiliency.